What is Option Gamma?
Option Gamma A measure of the rate of change in an option’s delta relative to changes in the price of the underlying asset; indicates the convexity of an option’s value and risk exposure.
Source: CFA Institute, IFRS Foundation, FASB (GAAP), Basel III Framework
How is “Option Gamma” Used in Practice?
Option gamma quantifies the sensitivity of delta to price changes in the underlying and is key for managing nonlinear risk in large options portfolios.
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Who Needs to Know This Term?
- Financial Analysts
- Bankers
- Traders
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What is Option Gamma?
A measure of the rate of change in an option’s delta relative to changes in the price of the underlying asset; indicates the convexity of an option’s value and risk exposure.
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